Press Release No. 10/16

Press Release: IMF Mission to Romania Reaches Staff-Level Agreement on Second and Third Reviews of Stand-By Arrangement

January 27, 2010

A mission from the International Monetary Fund (IMF), visited Bucharest from January 20 to 27 to review progress under the economic program that is being supported by a Stand-By Arrangement (SBA).

IMF mission chief Jeffrey Franks made the following statement at the end of the visit today:

“We have reached agreement at staff level on the second and third reviews of the IMF-supported SBA. Subject to approval of this agreement by Fund Management, and, subsequently, by the Executive Board, both the third (SDR 1,409 million or about €1.5 billion) and the fourth disbursements (SDR 766 million or about €0.8 billion) would become available. We will propose to our Board that half of these disbursements be allocated to fiscal financing. The Executive Board meeting is tentatively planned for mid-February.

“Romania’s macroeconomic outlook is improving due to stronger external demand. Our projections for economic growth remain unchanged from December. We expect that in 2009 the drop in growth will be contained to about 7 percent, and that growth will become positive for 2010, increasing to about 1.3 percent.

“Available figures suggest that the end-December targets were observed with the exception of the one relating to arrears of the general government. The 2009 cash budget deficit target of 7.3 percent of GDP was thus achieved. However, indicative targets for current spending were not fully observed, suggesting that further efforts are needed to control recurrent expenditure so as to direct more resources to investment.

“We reviewed the adopted 2010 budget, which has a cash deficit of 5.9 percent of GDP. It includes measures of about 2½ percentage points of GDP, mainly on the expenditure side, including policies to contain the public wage bill. The IMF also welcomes the proposed structural reform agenda, which would increase the efficiency of the public sector and make the economy more competitive and flexible. Specifically, the fiscal responsibility law, the revised pension law, and the implementing legislation to the unitary public pay law that are expected to be approved in the coming months, along with new controls on loss-making public enterprises.”

The IMF mission worked very closely with missions from the European Commission and the World Bank, which are also supporting to Romania’s Economic Program.

For information on the Stand-By Arrangement, please see the following links:

Romania and the IMF: http://www.imf.org/external/country/ROU/index.htm

Key documents are also available in Romanian: http://www.fmi.ro/